Four Common Self-limiting Beliefs
- In this episode we discuss some common self-limiting beliefs that hold people back from pursuing FI and how to overcome them.
- #1 – I don’t make enough money
- #2 – I don’t want to live a restricted life, one that requires sacrifice
- #3 – I’m not good with money
- #4 – I don’t have enough time
- Here are the counter arguments to the 4 self-limiting beliefs
#1 – I don’t make enough money
- Ironically, one of the main influencers of the FIRE movement, Jacob Lund Fisker, author of Extreme Early Retirement, was not a high income individual. While attending the University of Basel in Switzerland, he lived on education grant which covered his modest living expenses. After he graduated and went to work his income increased. However, he continued to limit his living expenses to his education grant. His savings rate soared to 80%. Once his savings grew to 25 times his living expenses, he considered himself financially independent. Now according to conventional personal finance advice, you should save 10-15%. At that rate it takes between 5 and 10 years to cover one year of expenses. However, with a savings rate of 75%, it’s possible to cover 3 years of expenses for each year worked. The big takeaway is that income or wealth in relation to expenses is more important than absolute wealth. You adjust your expenses to your income constraints and or increase your income to live below your means in order to save.
- We’ve come across examples of people of modest means who are on the road to retiring earlier. Check out story 23 in Late Starter FIRE series which is titled Retire Early with a Low Income.
- Your definition of financial independence can be aligned with a version of FIRE that works for you. For example, if you have lower income, you need to save less if your goal is lean FIRE, barista FIRE or Coast FIRE.
- The bottom line is that income is not the sole determinant of whether someone can achieve FI. After all, why aren’t all high earners financially independent? (Because they aren’t living below their means!)
#2 – I don’t want to live a restricted life, one that requires sacrifice
- Reducing spending is not about sacrifice. It’s about making spending decisions based on your values and goals. For example, you may have read or heard about people in the FIRE community chiding anyone who pays $5 for an espresso drink. But we believe that if that drink is something someone really values, then it’s OK. However, we recommend that they adjust other components of their discretionary budget to accommodate it.
- The accumulation of stuff doesn’t lead to happiness. Studies have shown that materialistic people are actually less happy than their peers.
- You need to find a balance between spending to live for today and saving to live well in the future. The practices of FIRE can help you figure that out.
#3 – I’m not good with money
- There are many sources of financial information to help you learn about money.
- There are tools available to help you manage your money better.
- You don’t have to go it alone. You can engage financial advisors and planners to help. Plus there is the broad and diverse FIRE community available to you.
#4 – I don’t have enough time
- People are living longer and healthier.
- There are actually several advantages that late starters have
- Peak earnings years
- Catch up contributions
- Lots of opportunity reduce expenses
- I wrote about Deb Jacobs of FI After 50. Deb is a late starter. She got interested in FIRE when a friend suggested that she check out the House of FI podcast. Here’s what Deb says about her late start. It’s entirely possible I can live another 30+ years so why not make the most of them? That’s why I invest in a healthy lifestyle and pursue FIRE. My advice is to start with one small change like cutting an expense. Small changes add up. Just get started!
- Getting started can be challenging because there’s a lot of information and approaches out there. That’s why we wrote our Quick Start Guide. It features 3 easy steps to get started on the road to financial independence.